Agreement Letter: Why You Should Write One

In the business world, numerous transactions and deals take place between business partners and others. It is beneficial to outline terms and expectations in writing to set out the conditions of an agreement and reduce the possibility of misunderstandings or even disputes. This is where a letter of agreement can help.

This letter holds everyone take responsibility for completing their duties and is a necessary document for any party seeking a written record of the agreed-upon services and conditions.

In this article, we will define a letter of agreement, discuss its common uses, explain how to write one, and provide a template and example to get you started.

What is an Agreement Letter?

A letter of agreement is a business document that explains and establishes the terms of a working agreement between two or more parties. The letter of agreement typically includes details like the contact information of the involved parties, the agreed-upon payments and the timeline. The agreement letter’s purpose is to protect your rights while also clearly stating everyone’s responsibilities.

Common Reasons to Write an Agreement Letter

Some common reasons for writing a letter of agreement are as follows:

Customer contracts
Non-compete agreements
Leases
Employment agreements
Deposit agreements

How to Write an Agreement Letter

When writing a letter of agreement, try to use professional language and write all of the agreed terms and conditions as objectively as possible. Here are the steps to writing a letter of agreement:

Title the Document

Put the title at the top of the page. For simplicity, “Letter of Agreement” can be used. If you write a lot of letters of agreement, you might want to include one or two specific details, such as the names of the parties involved or the general agreement topic.

List your personal information

Just below the document’s title, you can enter your personal information, such as:

Your name
Physical Address
City
State
Zip Code

Include the date

Place the date beneath your contact information. The date should correspond to the date on which you are writing the letter.

Add the recipient’s personal information

Add the recipient’s personal information below the date. The following details should be included:

Recipient’s name
Recipient’s title
Recipient’s company name
Physical address
City
State
ZIP Code

Address the recipient

Include a salutation after the recipient’s name and address. The salutation is usually “dear,” followed by the recipient’s name. Salutations such as “Dear Josh” or “Dear Ms. Mun” are appropriate.

Create an introductory paragraph

Begin your first paragraph by explaining the letter’s purpose and addressing all parties involved. In this paragraph, you only need two or three short sentences to explain your purpose. Keeping it brief can help you capture and maintain the reader’s attention.

Write your body

The body is where you go into deeper detail about the agreement. Though a letter of agreement is typically only one page long, you can extend it to include all of the agreement’s details. A bulleted list can also be used to clearly define each term in the agreement. You may want to include the following information in the body paragraphs:

Services: This information explains the obligations that both parties agreed to fulfill as part of the agreement.
Fees and additional costs: This section explains the agreement’s compensation. Any additional compensation terms beyond the basic payment plan are also included here.
Timeline: The timeline outlines the deadlines that the parties agreed upon. You should also include the agreement’s official start and end dates.
Terms of payment: The payment terms specify how payments will be distributed. This may include information such as the frequency of payments and the amount of each payment.

Conclude the letter

Include a brief closing paragraph after the agreement’s terms. It could reconfirm the body and mention any other details you haven’t addressed yet. This paragraph should be two to three sentences in length.

Choose a closing

Finish the letter with a heartfelt but professional closing phrase. There are numerous closings to choose from, but some of the most common are:

Regards
Sincerely
Respectfully

Sign the letter

Sign and print your name below the letter. Include enough signature lines for each party. You can also include lines indicating when they signed the letter of agreement.

Tips in Writing an Agreement Letter

Here are some tips you can follow as you write an agreement letter:

Make your agreement letter as brief as possible, expressing no more than a simple consent or agreement on the issue at hand. Write concisely but clearly.
Maintain a formal tone throughout your agreement letter. Even if you are writing it for a close friend, it should not be casual.
Keep your agreement letter formal throughout. Even if you are writing it for a close friend, it should not be casual.

Different Uses of Agreement Letter

The following are the various uses of Agreement Letter, along with their definitions:

Agreement Letter for Debt Settlement

A debt settlement agreement letter is typically used to put in writing your verbal agreement to settle your debt with your creditor or collection agency.

Agreement Letter for Event Sponsorship

An Event Sponsorship Agreement is a legal document used when one person or organization (the “sponsor”) agrees to sponsor an event organized by another person or organization (the “organizer”).

Agreement Letter for House Rent

An agreement letter for renting a house is a formal letter in which the two parties, the lender and the tenant, express their acceptance of the contract. This letter is usually considered as an acknowledgment to the lender about the terms of the agreement.

Agreement Letter for Child Support

A child support agreement letter can be written by one of the divorcing parents and signed by the other as well as a witness, or it can be written by a third-party mediator, such as a lawyer, who will also sign the agreement.

Agreement Letter for Investment

The goal of an investment letter is to get both parties to agree on the terms of an agreement without entering into a legally binding agreement, and the terms may be negotiated through revisions to the investment letter agreement.

Sample and Template

The following is a sample and template that you can use to get started on your own letter of agreement:

Letter of Agreement Template

[Title of document]

[Your name]

[Address]

[City, State ZIP Code]

[Date]

[Recipient’s name]

[Recipient’s title]

[Recipient’s company name]

[Address]

[City, ZIP Code]

Dear [Recipient’s name],

This letter formalizes the partnership between [recipient’s company name] and [your company name]. This agreement acknowledges that [your name] will provide professional expertise on behalf of [your company’s name] throughout the project with [recipient’s company name].

According to the agreement, [your name] will complete the following tasks from the project’s start date on [date] to the project’s end date on [date]:

[Service 1]
[Service 2]
[Service 3]
[Service 4]
[Service 5]

According to the agreed-upon terms, [your name] will be compensated in the amount of [amount] by [recipient’s company name]. [Your name] will be paid in full for the completion of their provided services on the project end date via direct deposit. Should such circumstances arise, any additional compensation for an extension of [your name] services will be determined at that time.

Please sign and date the lines below to indicate your acceptance of the terms of this letter. Please return one copy to the above address and keep the other for your records.

Sincerely,

[Your signature]

[Current date]

[Recipient’s signature]

[Current date when they received and signed the letter]

Letter of Agreement Example

Agreement Letter

Kate Elore Gomez

1234 Elk Rd.

Westland, GA 73215

March 24, 2020

Joseph Frome

Finance Manager GreenSun National Banking Corporation

456 Filbert St.

Ramsey, NY 20835

Dear Joseph Frome,

This letter is the formal agreement between GreenSun National Banking Corporation and First Financial Consulting. Throughout the project with GreenSun National Banking Corporation, Kate Elore Gomez will provide professional financial expertise on behalf of First Financial Consulting.

According to the agreement, Kate Elore Gomez will perform the following tasks from the start of the project on December 1, 2021 to the end of the project on April 2, 2020.

Consult with GreenSun National Banking Corporation customers to determine their financial and investment requirements.
Provide knowledgeable recommendations from GreenSun Nation Banking Corporation’s portfolio based on their customers’ product needs.
Provide potential and current clients with brokerage services and expert knowledge.
Complete all financial paperwork accurately and on time to ensure that no policy violations have occurred.
Conduct research and interview clients to determine their current and future financial requirements.
Maintain and strengthen client-GreenSun relationships
Actively seek and acquire new clients for the firm.
Serve as a mentor to junior employees.

GreenSun National Banking Corporation will compensate Kate Elore Gomez in the amount of $9,000 under the terms of the agreement. She will be paid in full for the completion of her provided services on the project end date via direct deposit. Should such circumstances arise, any additional compensation for an extension of Kate Elore’s services will be determined at that time.